Patty Da Silva had the pleasure of being interviewed by Polyana da Costa, the Real Estate Reporter at Daily Business Review. Patty was interviewed on the misconceptions of the upcoming short sale guidelines (HAFA) being implemented on April 5, 2010.Read full article below:

Buyers and sellers hoping new federal guidelines will spur lenders to streamline a lengthy short-sales process — from more than one year in some cases to 10 days — may be disappointed.

Real estate agents and lawyers agree the federal initiative offers benefits, but some say there are widespread misunderstandings about the Home Affordable Foreclosure Alternatives program, which will take effect April 5.

The major confusion, they say, is that lenders will suddenly speed up the processing of short-sale requests to participate in the program.

Short sale guidelines

“Some people are thinking, ‘Oh, my God, I’ll find a buyer and this will be approved in 10 days.’ There is no way that is happening,” said short-sale specialist Patty Da Silva, owner of Green Realty in Davie.

“Lenders will have 10 days to make a decision after everything has been done on the files, including getting all the short-sale package reviewed, the seller’s financial information, their [broker price opinion], and this can still take months. There is huge misconception out there.”

The federal government created the HAFA program to encourage lenders to negotiate short sales with struggling homeowners who were unable to modify their mortgages. In a short sale, the lender agrees to the sale of a property for less than the amount owed on the mortgage.

Under the program, which runs through 2012, banks and loan servicers that comply with its guidelines will receive $1,000 from the U.S. to cover administrative fees and processing costs.

First mortgage lenders willing to share with the second mortgage holder up to $3,000 of the proceeds of a short sale are given an additional $1,000.

In exchange for the $1,000, first mortgage holders are also required to release the borrower from further liability and deficiencies on the mortgage.

In order to do a short-sale under the HAFA program, borrowers need to have first tried to apply for the federal loan modification program. Borrowers who are not approved or can’t afford the loan modification or miss payments while in the program become eligible for HAFA and should receive notification of their eligibility from their lenders.

The borrower then has 14 days to respond. Once the borrower is approved for a short sale, the lender has ordered an appraisal of the property, and all the buyer’s and seller’s required documentation is completed and approved, which can be a lengthy process, the loan servicer has 10 days to either deny or accept the purchase offer.

“They will count the 10 business days from when the filing is complete,” said attorney Daniel Kaskel, who represents several homeowners in the short-sale process. “But what oftentimes happens is banks will reject short-sale packages for various reasons, like failing to include pay stubs or financial data, and that delays the process.”

Another downside of the program: Borrowers with mortgages held by government sponsored lenders Fannie Mae and Freddie Mac are not eligible for the HAFA program. That means more than half the borrowers in the nation are excluded from the program.

Alejandro Diaz Bazan of Avatar Real Estate Services, a Miami company that focuses on sales of distressed properties, said he doesn’t think the program will have an immediate impact on short sales.

“Every bank is different, but I don’t think they are going to rush their short sales just to participate in the program,” he said. “For one, [the lenders] can’t process [the short sales] so quickly; and two, once they accept the short sale they need to put the loss on their balance sheet. Do you think they are going to start accepting [so many losses through these short sales] at once? They would become insolvent.”

Although Kaskel said he doesn’t think the guidelines will impact the market soon, “anything helps.”

“It’s not like on April 6 short sales will be happening right and left,” he said. “But it is one step in the right direction.”

The program also offers incentives to lenders who accept deeds in lieu of foreclosures and release borrowers from further liabilities on the mortgage.

“It does come with benefits,” Da Silva said. “The biggest one for Florida is they have to waive the deficiency judgments.”

But Da Silva is concerned about how second-mortgage holders will be impacted. One of the biggest obstacles to getting short sales approved is the resistance from the second mortgage lenders.

They know they will be left with nothing once the first mortgage holder forecloses on the property so they have no motivation to cooperate and release the lien on the home.

In order to close short-sale deals, some lenders that hold first mortgages offer to share a small part of the proceeds from the sale to a new owner with the second mortgage holder.

The amount the first mortgage holder can pay the second mortgage lender is capped at $3,000 in order for the first lender to be eligible to receive $1,000 back from the program.

“It will work for some cases but you will also see some second mortgage holders saying, ‘I don’t want $3,000. I’m used to getting $5,000.’ Or you’ll see them saying, ‘I’ll agree to receive $3,000 but the seller continues responsible for the remainder of the loan.’ ”

Ron Shuffield, president of Esslinger Wooten Maxwell, a large brokerage company in Miami, isn’t as critical of the program.

“I want to be optimistic,” he said. “I’m hearing from some of the major lenders ... that they will participate and they are trying to organize themselves to new guidelines.”

A spokesman for SunTrust Bank said the lender is “planning to participate” in the HAFA program but could not provide additional details.

Da Silva said she recently worked on a short-sale deal involving SunTrust and it took the lender nine months to approve the deal.

Other lenders, including CitiMortgage and Wachovia, now owned by Wells Fargo, declined to say if they would participate in the program.

“We proactively get involved in potential short sales as soon as the property is listed,” a CitiMortgage spokesman said in an e-mailed statement. “This allows us to gather valuations and documentation in advance of an offer, drastically reducing the time it takes us to respond.”

He declined further comment.

Wells Fargo and Citi respond to short-sale offers more quickly than most lenders, Da Silva and other agents said.

Bank of America, which has been heavily criticized by agents and sellers for taking months to process short sales, said it will participate in the program. The bank said it increased its home lending staff by 90 percent last year and currently attempts to process short sales within 60 days.

According to Da Silva, the bank has been one of the most difficult lenders to deal with on short sales. However, it has cut its short-sale processing time from an average of nine months to about 4½, she said.

Jumana Bauwens, a spokeswoman for Bank of America, said the lender “has taken steps to shorten response times and improve overall communication.”

The bank recently started using an online program Equator that provides homeowners, agents and bank personnel real-time information on the progress of the short-sale applications, Bauwens said.

The bank said it launched a pilot program, in which it would work with the borrower and agent during the marketing process and be able to approve a sale within two weeks after the bank receives an offer.

“This program is currently in a limited pilot stage, and we hope to expand it soon,” she wrote in a statement.

OneWest Bank, which took over troubled IndyMac, said it will also participate in the HAFA program. The bank has not said if it has increased its staff to handle the increased volume of short-sale cases.

Avatar’s Diaz-Bazan said he has been involved with short sales that have taken more than a year to be approved. He said many agents refuse to take short-sale listings or make little effort to show homes that will be short sales because they are frustrated by the drawn-out process.

“A lot of them don’t believe the deal will work,” he said.

Agents, buyers and sellers need to be persistent to close a short sale, Diaz-Bazan said. “You have to call in everyday to follow-up.”

Daily Business Review ::: Written by Polyana da Costa------------------------------------------------------------------------------------------------------------------------------------------